Hornby warned a foreign exchange hit linked to last year’s supply chain derailment would drag it to a worse-than-expected £1.2m loss.

The maker of Airfix and Scalextric blamed its third profit warning in two years on Chinese supplier Sanda Kan’s failure to deliver products in sufficient quantity.

Foreign exchange movements related to its subsequent divorce from the Chinese firm will shave a further £200,000 off its bottom line, Hornby said, adding to a £1m hit it predicted in January.

This is due to currency movements on
Hong Kong dollars that Hornby was holding to pay Sanda Kan for tools,
parts and products that were yet to be made.

Ending
the partnership saw it convert the money back into pounds,
crystallising losses because sterling strengthened in the meantime.

It also wrote down £600,000 as it was forced to pay to get its tools and half-finished products back.

Hornby
(down 1.25p to 79p) has since broadened its supplier base to ten
companies in China and India, ending its relationship with Sanda Kan,
which made about 60 per cent of Hornby’s train set and Scalextric
ranges. Full-year losses will now be around £1.2m, the company said, up
from the £1m loss it predicted in January.

But
the hobbyists’ favourite said it would break even on an underlying
basis and does not expect a further hit from the supply disruption.

‘With
the main obstacle to an improved and efficient supply chain out of the
way, we expect a gradual improvement in its reliability and quality’, a
spokesman for the company said.

Hornby has hired former Ladbrokes man Richard Ames to lead a revival and he is due to start the role later this month.

Ames
was axed at Ladbrokes, but gambling industry insiders said he became a
scapegoat as the only senior executive left over from the dismal reign
of the bookie’s former boss Chris Bell.